Modern organizations are well inclined to expanding the operations of their business over the international shores. They are concerned with the growth of the business which involves having access to more customers, achieving some set-out goals and objectives, mission broadening as well as the acquisition of other companies to the business. But with expansion comes some challenges and risks which range from the management of the welfare of the employees to the cost of establishing an entity in another country. The employer of record (EOR) has made these goals achievable and also helps to mitigate the risks which should have been shouldered when companies are in the business of expanding.
What does EOR mean?
The regulation of the relationship between the company and its foreign employees is done by an Employer of Record. The EOR helps client companies to retain, hire employees, and taking care of payroll issues that could arise due to varied national regulations. The Employer of Record helps client companies to take care of applications of their global employees. EOR’s are also valuable to client companies in providing solutions to legal issues. Global Employer of record is also invaluable to expanding companies as they help relieve the headache of client companies wanting to pay their global employees without encountering any hassle or local law challenges.
Origin of EOR?
Employer of record like WeHireGlobally has become popularized and in use due to the need for global mobility that comes with growth and expansion being witnessed in the global business over the years. The improvement in the level of technology has made it possible for the increase in demand of global employees to take care of the geometric increase of supply work. This increase in demand has led to the proportional demand for EOR’s. The employer of record, therefore, is an inevitable system for companies who are looking to expand to the global market. This expansion warrants the need for an effective payroll system, top-class human resources service for the convenience of their employees. The EOR takes care of these needs in such an efficient way.
Advantages of Employer of Record?
There are so many advantages with the use of the global employer of record. One advantage of a global employer of record like WeHireGlobally is that it assists client companies to deal with the legal framework of employment contracts. It, therefore, helps with increasing the productivity of the client companies as valuable time and resources are saved. The time and resources saved are rather used to coming up with the improvement of the business which includes expansion.
Also, the Employer of Record makes it possible for both the employers and the employees to all be “employees” of the employer of record as soon as the client company is in use of the EOR. This makes it easy handling of issues that pertains to the welfare of the employee by the employer of record without undergoing any interruption. It is therefore easy for client companies to carry out the hiring of international employees as the issues that may pertain to human resources and the welfare of the employees are catered for by the EOR.
How Does EOR work?
EOR’s as stated earlier assumes the challenges that may come with the launching of entities in the global sphere on behalf of client companies. All employment issues such as payroll, HR services, issues with tax, contract requirements, and other benefits or issues are well provided and taken care of by the global employer of record. The local proceedings and regulations that are needed to be possessed to hire international employees are handled by EOR’s. There is therefore no need for the presence of an entity of the client company in another country where they are working because the employer of record can offer effective services needed by companies who need expansion into the global market.
Why EOR should be used by companies?
employer of record is a very inevitable and essential service that big companies should be in use of. The essential reasons why an employer of record is needed to be made use of by client companies are;
Time and Cost are saved
The EOR should be used as it helps to save time and costs which is a no-brainer. Time used by the client company in recruiting as well as taking care of the welfare and the HR needs of their global employees is effectively and efficiently saved by EOR’s. Employers of record help to minimize the amount of cost spent by the client company as it finds minimum cost for the client companies in providing human resources services, payroll as well as other benefits to the employees. The minimization of this cost by the employer of record helps to increase the money saved which creates the opportunity for global expansion of allowing the client companies to achieve bigger things over the long term.
Legal Consistency for National and International Zones is improved
Employer of Record is a global resource that helps client companies to hire international employees and taking care of the legal framework of such act in that legal consistency for all global zones is improved. Employer of record helps to take care of legislation that concerns each employee that is employed by the client companies whether locally or internationally.
Risks are Decreased
Risks that may be of major concern for client companies in hiring global employees are taken care of by EOR. This is done by the employer of record by making sure to take care of paperwork and issues that relate to the welfare of the employees. The employer of record works hand in hand with scouts of the client companies to come up with talented employees in the global world.
EOR’s also helps client companies to take care of employees’ administration which includes a global payroll system, employee benefits, and other HR issues which saves the client companies of the stress of taking care of such issues. Cost is also saved by the client companies in having to deal with employment contracts of their global employees.
The employer of record also has the right to contract and taking care of administrative roles on behalf of the company which gives the client company ample chance to work with various providers. EOR’s also has their services customized and well flexible compared to other services and hiring them makes them legal partners. Employers of record being legal partners makes them responsible for liabilities and ensures that they provide correct and services that are legally free of problems on behalf of the client companies. Due to this sophisticated service, there is no need for client companies to have legal incorporation as this service is provided by the employer of record. Despite the global changing laws which may take some time for the client companies to stay ahead of, EOR’s are well covered with the changing laws and they ensure to keep the client companies well in line with these laws which leads to the smooth management of the administrative duties of the client companies.
The Obligations of the EOR
The Employer of Record take responsibilities that pertain to issues of liabilities about employment tasks such as payroll, employee benefits, and taxes. EOR’s take these responsibilities on behalf of the client companies who are in use of the employer of record service. EOR’s also undertake the responsibilities of safety and security compliance with the rules and regulations of both local and international guidelines.
What are the differences between Employer of Record (EOR) and Professional Employer Organization (PEO)?
Although the Professional Employer Organization (PEO) has some firm similarities with the Employer of Record (EOR), there exists some clear variance between them. PEO’s and EOR’s are sometimes confused with each other which leads to the wrong selection of services that happens to some client companies. The PEO’s and the EOR’s serve extremely different services to clients.
The major differences are;
- How insured the client companies are,
- The liability of the client company,
- Compliance Management of Regulations, and
- Business Registration of the client company.
PEO and EOR Comparison within the Client Company
The hiring of employees, providing solutions to payroll, and taking responsibility for employment contracts are carried out by the Employer of Records. PEO’s, on the other hand, is tasked with the provision of human resource services for the client companies.
PEO does have the right to employment contracts of employees but does not have the jurisdiction of signing and contracting with employees on behalf of the client companies. This is different from the employer of record which has the right to sign and contract with employees on behalf of client companies. The client companies should be in knowledge of how different the PEO’s are from the EOR’s as the services which either of these companies offers are different which affects the liabilities of either of them.
EOR’s are known as legal employers of the employees of the client companies alongside the client companies. PEO’s are just the custodians in charge of taking care of responsibilities that pertain to the activities in the company. The liabilities of the client companies are also taken care of by the employer of record companies. EOR’s also provide solutions to disputes that concern contracts of employment of employees hired by the client companies. The process of onboarding global employees from different countries of the world do entails taking care of legal issues and making sure the contract of employment is well in line with local laws of the targeted countries. This process, therefore, is taken care of by the EOR’s as they make sure that the process runs smoothly without any hitch. The solution to legal troubles is provided according to local regulatory provisions and laws in which the PEO’s are not qualified to get involved. EOR’s however are tasked with disputes solution, settling the benefits of the employees, and having to make sure that the employees onboarding process are in line with the local regulation provisions.
On the issue of insurance, the client companies pay much more money to a PEO company as compared with the employer of record company. EOR’s are tasked with providing insurance as part of their services which is paid for along with the money required to hire such a company. PEO’s aren’t tasked with ensuring a client company, if the client company needs insurance from the PEO company, there is a need for them to pay extra for such service.
EOR companies are duly registered in their target country which gives them the edge over PEO’s that are not registered globally. The compliance management of regulations is therefore taking care of easily by hiring an employer of record company as compared with the PEO.
PEO is the best option for companies that are of small size whose operations are carried out locally. EOR’s are the best bet for companies that are of mid to big size and are looking to expand their operations in the global sphere.
When should EOR be made use of by the client company?
A company that is of the idea of expanding globally needs the employer of record for the smooth running of its operation because the management of administrative roles is a vital part of any organization. The exploration of a new supply market and the management of challenges that arise from expansion is taken care of by a credible employer of record company. A credible EOR company such as WeHireGlobally helps to take care of your complicated paperwork(s) and legal issues. They also assume administrative responsibilities on behalf of your company.
How should an EOR be used?
Some factors need to be considered before choosing a perfect employer of record for a client company. Careful research needs to be undertaken by the client company on EOR’s and their effectiveness in target countries.
In choosing a perfect employer of record, the client companies should also make sure to know whether the EOR companies have considerable knowledge about the local rules and regulations of the countries they are targeting. There is the need to know the level of applicability of contract of employments meant for their employees to get the best possible results.
WeHireGlobally is a well-respected global employer of record company that helps to support your business in the process of global expansion. WeHireGlobally serves companies of any size, from big multinational corporations which are on the lookout for conquering new markets to startups that are growing fast and already have remote team members abroad. They ensure the quick and easy onboarding of talents globally and ensure they are paid by the local legislation.
What are the limitations of using EOR?
Despite the very many benefits which EOR provides for client companies, there are also limitations that affect the use of an employer of record by client companies.
One of the limitations of using an employer of record is the issue of employee size in a country. EOR’s can’t be used by countries that have more than ten employees working in one country. For EOR to be used effectively by a company, the number of employees working for that company in a particular country must not exceed 10.
Another limit to the use of an employer of record is the fact that EOR serves as a legal employer of employees of a client company, and this is in variance with the traditional ideas of numerous companies. This clause is frowned upon by some companies who do not want to be in partnership with the EOR’s. With this clause, the contract of employment is between the employer of record and the employees of the companies which does not give the client companies the avenue of making independent decisions.
Final Thoughts
EOR’s is the most effective way to deploy employees in another country because they have the appropriate solutions for complicated payroll, tax, and employment issues. Most of the headaches of taking care of payroll payments, solving tax issues, and the smooth hiring of global employees are taken care of by EOR’s which gives relief to client companies. The advantages of employer of record to expanding companies cannot be overemphasized as it is a great tool for taking care of administrative issues and ensuring that there is a smooth running of activities in the client companies.
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